Episode Thirty-Five: It's a Party
A throwaway line in a recent Bloomberg piece caught our eye:
“....One called on Starmer to appoint a senior economic policy adviser to scrutinize the chancellor’s decisions….”
As far as we can tell this attracted no wider comment, but it says so much about the chronic undermanning of the British state. Others, like Sam Freedman, have written compellingly and comprehensively about how No.10 is less well staffed than some German mayoral offices. It would be easy to chalk this up to a failure of state capacity, but we think this is not quite right. The problem is a lack of party capacity.
One of the most important reasons why political parties need more capacity is that they do not control civil service staffing, and therefore incentives are fundamentally misaligned between politicians and officials. Politicians, once in office, need to get re-elected. Officials do not. This automatically limits the space of political action to the realm of the politically acceptable. There is no way around this: it is a fundamental feature of democracy (and, realistically, most autocracies as well!) and this is not necessarily a bad thing either. Feedback mechanisms from people to elites are valuable and important things.
Officials, however, do not operate under such constraints, and so are free to propose all kinds of schemes that may well make technocratic sense but fail the most basic sense check. Whether Labour or Tory, every Chancellor soon comes to realize that the Treasury is not their friend. National road pricing is one idea the Treasury loves and every single Chancellor automatically rejects out of well-founded fear of the motorist. As a wise philosopher once said to us, even if Jeremy Corbyn had become Prime Minister, he still would likely never have put fuel duty up! The real problem arises when the Treasury proposes some technical-sound tweak to an already very overcomplicated tax and benefits system, and politicians do not realize in time what the consequences will be.
The recent changes to the inheritance tax system for farms is surely one such instance. There is no way Starmer and Reeves envisaged giant convoys of tractors parking themselves outside Downing Street, plus the political awakening of Jeremy Clarkson. Had they actually realized the full implications of the policy, they would surely have known within about five minutes that the inevitable political backlash was not worth the very small amount of additional revenue raised. Of course, once you’ve tied yourself to the mast, perhaps backing down might be thought to come with even more painful additional costs, so the problem just compounds.
Where future administrations will be formed, over several pints.
Sadly of course, they did not realize in time, and perhaps neither did the Treasury itself given how some of the problem arises from the interaction between different types of relief. We claim, however, that the problem would have been much more likely to be caught in time if No.10 had on board not just one but perhaps thirty senior economic advisor-SPADs, all of them paid a salary that would make the Guardian and Mail alike seethe with rage. The team would be balanced between eminent economists, distinguished tax practitioners, and bright young generalist twenty-somethings with a good head for figures and an acute eye for political bear traps. Of course, the Treasury should also have such a team, personally appointed by the Chancellor and responsible to her alone.
In the real world, however, neither political party has any kind of talent pipeline to fill an administration with anything like the numbers of competent and trusted advisors required to even begin the painful task of turning the state around and making it more responsive to the political priorities of Ministers. The trust question is crucial and explains why the criticism of nepotism often levelled against spad hiring is so badly misplaced: (Prime) Ministers and spads ideally need to have a good prior relationship so that the former trust the latter not to be leaking everything to the press as a means of advancing their own agendas. Everything good in politics runs on trust, why is careful but large-scale talent pipelining in advance of taking power matters so much. To run the state with even a modicum of competence, a pipeline of at least five thousand need to be prepared across new MPs, special and political advisors to staff extended ministerial offices and a real Department of the Prime Minister, and appointees to the non-departmental public bodies that cannot or should not simply be shuttered.
Exactly the same question of trust applies to these public appointments. Even if a future anti-antitrust administration sweeps to power and needs to install a new head of the Competition and Markets Authority with a set of instructions to do absolutely nothing for the next five years, the PM, Chancellor, and Business Secretary still need to trust the appointed individual to actually do nothing once in post, and the person appointed ideally needs to be sufficiently eminent and respected to make the policy stick internally without a painful staff revolt and create a new internal culture at the CMA that persists over time.
This links back to our previous work on the failings of think-tanks, especially right-wing ones. Most things are too important not to be left to the market, but the absolute most important things of all need to be centrally planned. The flow of talent into politics is one. Neither Reform nor the Tory Party can allow the current situation to persist of small, disorganized, weak outrider organizations that contribute precious little in terms of top-tier analysis and contribute far less to the parties’ wider talent pipeline than they should. The problem is absolutely mission-critical for both, but perfectly fixable: it may even be somewhat easier to address for Reform given how their brand is perhaps less toxically contaminated by a disastrous long tenure in office, especially as and when Farage steps down as leader. At least 30% of whatever cash the parties can scrape together must go on whatever it takes building the right talent pipeline to staff a government. For the Tories, the leadership needs to start aggressively encouraging think tank mergers and actively working with donors to build bigger and better-functioning outrider organizations, no matter how many stakeholder feathers get ruffled in the process, and the leadership needs to take 100% control of MP candidate selections.
All of this can and must be done. The mainstream parties (Reform included) and the country as a whole are running out of time. Weak growth, high debt, and population ageing are quite rapidly creating an explosive fiscal time bomb. One day a geopolitical crisis will break out and gilt yields will spike dramatically upwards rather than falling. That will be the great point of no return that will make Truss’s mini-budget look like the Mad Hatter’s charmingly dotty tea party. Britain is absolutely stuffed full of amazingly talented people and attracts even more from abroad via the elite universities, but in twenty more years of state failure everyone will look at the country like Italians look at the Italian state now: simply too broken to ever fix. Immigration and chaotic public services are both fuelling a growing sense of rage that reflects in collapsing approval ratings for every leader almost as soon as they get elected. Functioning government to restore growth is no longer a luxury; party capacity is not some optional nice extra. This is no time for caution.